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15 to Watch - January 16, 2017


By Rick Horrow and Karla Swatek
with Jamie Swimmer

 

1. President-Elect Donald Trump’s sports industry involvement has been well chronicled, especially his golf resort holdings. What’s not as transparent is the impact his foreign policy decisions may have on the global sports industry -- and on sporting goods and apparel in particular. Overall, China exported about $482 billion in goods to the United States in 2015, more than any other country exported to the U.S., according to the Office of the United States Trade Representative. It’s no secret that the vast majority of the world’s sneakers are made in China, Indonesia, Korea, and the Philippines. But look at Callaway golf clubs – the leading American club maker designs its sticks in California, but parts come from China, Taiwan, and Vietnam, and many clubs are assembled in Mexico. Likewise Wilson tennis racquets are manufactured in Shanghai, as are Head and Prince. And Spalding basketballs are officially pieced together in Seoul. Within golf, four of the world’s top golf cart companies manufacture their vehicles in China, including No. 1 Marshell Electric Vehicle Co.; No. 10 EVT is in Thailand. If Trump is able to implement his anti-import trade proposals, including a 45% tariff on goods imported from China and a 35% tariff on Mexican goods, it could hit the American sporting goods industry especially hard, and may even curtail sports leagues’ expansion into Asia. Time will tell if the new President’s tough talk on trade will pan out – as a businessman with complex golf resort ties around the world, he may take a step back and reconsider some of the ramifications of his proposed policies, on sports and elsewhere.

 

2. The San Diego Chargers are officially moving to Los Angeles. The Southern California city that had no NFL teams last year will soon boast two teams for the foreseeable future. According to SportsBusiness Journal, Chargers Chain Dean Spanos made the official announcement that his team will be moving to L.A. beginning with the 2017 season. The Chargers will play their home games at Carson’s StubHub Center, which can hold only 30,000 spectators. That marks a massive downgrade in size from Qualcomm Stadium, representing the NFL’s smallest stadium by a longshot even with upgrades. The team passed up on using the Rose Bowl as a home, though they will join the Los Angeles Rams in their new $2.6 billion stadium in Inglewood upon completion. The Chargers "will change its logo to feature the letters L and A, arranged similarly" to the Dodgers’ logo. It also will "have a lightning bolt." Franchise musical chairs is almost over – at least for now. Chargers economics dictate that a share of a larger pot of revenue in Los Angeles is better than more time and effort chasing stadium projects by themselves. Now, it is the Raiders turn to take center stage.


3. As the dust settles on the San Diego Chargers announcement that they are moving to Los Angeles, attention now focuses on the market they’re leaving behind. What will the day to day impact be on a Charger-less city? While the game day economic impact will mostly be felt by stadium-adjacent small businesses like bars and restaurants, parking facilities, and Uber drivers, the biggest hits will likely affect the region’s nonprofits, and tourism sales. Despite the knocks it is taking for current franchise relocations, the NFL tries to be a good corporate citizen. The NFL Foundation hands out millions of dollars each year through its Play 60 Challenge, “A Crucial Catch“ American Cancer Society partnership, and individual player foundation grants. In San Diego, the Chargers have contributed or facilitated about $13 million to local charities, including providing 1.3 million meals to the San Diego Food Bank and helping the San Diego Blood Bank save 200,000 lives through blood drives. As for tourism, “I can’t pay for that kind of exposure,” Tourism Authority CEO Joe Terzi told the Union-Tribune, referring to the beauty shots of sparkling beaches and sunny skies during televised Chargers games. Bottom line: the intangible benefits of having an NFL team in your city matter much more than season ticket sales and naming rights deals.

4. The pro tennis circuit goes Down Under this week, and for American fans, it might be time to Sock It to Me. Young Nebraskan Jack Sock, 24, just won his second career title in New Zealand – one of the run up tournaments to the Australian Open beginning on Monday – has amassed $4.8 million in prize money. Ranked No. 20, Sock needs only three wins in Melbourne to supplant No. 19 John Isner as the highest-ranking American on the ATP Tour. On the women’s side, all eyes are still on Serena Williams, as she continues her race against Father Time and off-court distractions like her burgeoning fashion career and just-announced engagement. The tennis calendar’s first Major has raised its total prize money purse to $36.2 million (AU$50 million), "continuing the tournament’s stunning growth," according to the Melbourne Herald Sun. Both the men’s and women’s singles champions will receive a record $2.7 million -- an increase of $218,000 -- while "first-round losers will walk away" with almost $36,000 each, up more than $8,000 from 2016. Prize money has been boosted by 14% overall. More good news – according to the Physical Activity Council, U.S. tennis participation has increased to 17.9 million players, up 1% from 2013, meaning a slightly bigger pool from which to farm much-needed future American stars.

 

5. In a unanimous decision, FIFA has voted to expand the World Cup field from 32 to 48 teams starting in 2026. According to the London Independent, the new format will feature 16 groups of three teams “that sees the top two qualify for a knockout round of 32.” This replaces the current format that sees the top two teams from all eight groups advance to the round of 16. The 2026 World Cup is likely to be hosted in North America, with the United States, Canada, and Mexico preparing to submit a joint bid. The plans will see the total number of games "increase from 64 to 80," and the new format is expected to generate around $1 billion extra for the governing body from the World Cup alone. Critics of this move slam FIFA President Gianna Infantino for making a “selfish move” to deepen his personal pockets as well as those of everyone else in soccer’s main governing body. While any tinkering has its critics, kudos to Infantino for attempting to “shake up” the World Cup format – and also to increase global participation on an unprecedented scale.

6. Carl Edwards stunned the racing world with his decision to retire and “pursue other interests outside of driving,” according to Foxsports.com. Edwards will not compete in the upcoming 2017 season and will be replaced by Daniel Suarez, who won the Xfinity Series championship last year. Over his illustrious 13-year career, Edwards won 28 Cup races and “might be the best driver of this generation to never win a NASCAR Premier Series championship.” NASCAR insiders figured that the 37-year-old was good for at least 5-10 more years competing on the track, hence the “totally shocked” reaction by the motor sports community. "Carl Edwards is the type of guy that once he’s done with racing, he’ll probably never, ever delve into any type of racing….The sport takes a step back without guys like Carl Edwards. We need more Carl Edwards-type individuals in racing,” said Brad Daugherty, co-Owner of JTG Daugherty Racing. Another example of an athlete walking away in his prime for reasons other than money and fame. Good for Edwards to focus on other endeavors as he moves forward.

 

7. A new economic study commissioned by LA 2024 reveals that hosting the Summer Olympics is Los Angeles could generate as much as $11.2 billion in economic output for the city. According to the Orange County Register, the analysis done by Beacon Economics and the UC Riverside School of Business Center for Economic Forecasting & Development shows that the LA 2024 Olympics could create up to “79,307 jobs” and between $152-$167 million in additional tax revenues in the city. The analysis “projected 3.3 million visitors would attend” the Games, with the average visitor “staying in the city 5.5 days and spending an average of $230.07 per day.” While these studies are often a bit exaggerated, a huge selling point for Los Angeles’ hopeful bid to land the Olympics is that the city plans on using existing arenas and stadiums throughout the Southern California area. Some question these “civic studies,” arguing they are self-serving. For the most part, this one reflects the tremendous economic potential that the Games will have for the region. Most studies also ignore the positive branding, public relations, and international awareness benefits that come to a region after hosting a two-week mega event.

8. While our recent spate of bad winter weather has caused millions of dollars in damage and travel nightmares for the general public and stranded sports teams alike, it’s a ray of profit sunshine for the winter sports industry. The mounds of fresh powder piling up in California and Nevada ski resorts – more than 20 feet of new snow in some areas – ski resorts are seeing visitor numbers 5-10% higher than the same time last season. And those prime ski conditions are extending across the country, according to the National Ski Area Association, a trade group for the $3 billion industry. Ski resorts in California and Nevada reported 7.25 million skier and snowboarder visits during the 2015-2016 season, a huge jump over the 4.4 million the previous season. This year will see even more visitors, but they’ll be paying higher prices: Vail Resorts Epic Pass, which offers full season access to Vail resorts nationwide, will cost you $809 this season, a 5% increase over last year. While every snow cloud has a silver lining, resort operators wouldn’t stand to profit as much on Mother Nature’s bounty if they hadn’t focused on “the fan experience” every bit as much as their more mainstream sports peers.


9. The San Francisco 49ers are suing Santa Clara after the city claimed that the team violated its contract. According to the San Jose Mercury News, the 49ers have invited auditors to Levi’s Stadium to review documents with the intention of proving the accusations to be false. The “team wants a judge to settle the score by requiring the city to sign documents verifying no breaches occurred.” The legal battle between the 49ers and Santa Clara has been going on for months now, but this lawsuit marks an escalation in tensions between both sides. The lawsuit states the Stadium Authority has "embarked on a scheme to concoct and fabricate false accusations of breach or nonperformance…to create a pretext for terminating the Stadium Management Agreement.” This dispute originally started when Santa Clara Mayor Lisa Gillmor “suspected taxpayer dollars were being spent on the venue in violation of the voter-approved Measure J.” While the stadium continues to bring in significant international events such as the Super Bowl and major soccer festivals, the parties continue to litigate over emotional “performance” issues. Hopefully, they can be resolved quickly in order to focus on the bigger picture.

 

10. The New England Revolution have been in search of a soccer-specific home stadium in Boston for years now, but a final plan stills appears to be out of sight. According to the Boston Globe, Revolution Owner Robert Kraft’s effort to settle down and build in Rochester is “all but dead,” as the Boston Teachers Union will not budge on their land. The union is reluctant to give up the 2.7 acres that their headquarters has called home for four decades, which has stunted Kraft’s plans. The union is “asking for a deal that Kraft…thinks is too rich.” Kraft “needs about 10 acres for his stadium, and much of that would come from UMass.” But the stadium “doesn’t work without Kraft taking over the adjacent property, too.” The union is asking for at least $15.7 million in cash to settle the issue. Kraft “wants a soccer stadium in Boston, but not if it feels like he’s being ripped off.” The Kraft family has looked long and hard for appropriate stadium solutions, using the successful model of Foxborough/Gillette Stadium/Patriot Place as a guide. Hopefully, something can be done quickly.

 

11. As the Atlanta Falcons prepare for the AFC Conference Championship, Atlanta Hawks General Manager Wes Wilcox is being disciplined after making a “racially charged joke” during a season-ticket holder event last month. According to ESPN.com, the unspecified disciplinary action came from within. Deadspin initially reported that Wilcox responded to a few challenging questions from attendees by saying he had “a black wife and three mixed kids, so I’m used to being angry and argumentative.” The team conducted an internal investigation following the comments and concluded that Wilcox in fact did not use the worlds “angry” and “argumentative,” but did mention race. Hawks Senior Vice President/Community and Chief Diversity & Inclusion Officer Nzinga Shaw said, "…I am not convinced that what we heard and read in Deadspin is a direct quote…Wes, however, certainly did make his off-color statement, which included elements of describing his wife’s race…We certainly do not approve of this behavior and we are going to handle this manner internally." Sensitivity rules the day, and those dealing with the ticket buying public should be held to a much higher standard. This is especially the case with a team fighting for its rightful market share and competing with two new stadiums opening within the next year.

 

12. South Korea has announced that it will spend approximately $780 million to prepare for next year’s PyeongChang Winter Olympics and Paralympics. According to the Korea Times, this number comes from the country’s Ministry of Culture, Sports & Tourism, as the governing body is setting up for South Korea’s first-ever Winter Olympics. Most of these expenses will be used to support “operational preparations, national team athletes’ training and facility construction.” South Korea is heavily investing in its athletes for the 2018 Olympics, as “it will pay for overseas training for athletes, recruit more foreign coaches and help secure more time for the athletes to train in the Olympic facilities.” The largest portion of the budget, approximately $608.3 million, has been allocated for construction of facilities. The overall spending budget for the Ministry of Culture, Sports & Tourism has been reduced “following the revision of laws that allow the organizers to pursue various business activities and receive tax benefits.” All Olympic cities are acutely aware that they will be evaluated on budget performance, as well as overall legacy. Will the South Korea Games be more like the successes of London, Atlanta, Los Angeles, and Sydney; or will they be evaluated in a lesser light like Sochi, Athens, and Beijing?

 

13. The San Jose Sharks have a new ticket pricing guide: sales history. According to the Silicon Valley Business Journal, the Sharks are “now able to research the sales history and current demand for each individual seat at the SAP Center.” The team has used row-by-row data historically, but has since found that seat-by-seat data is far more accurate to appropriately price seats. This season’s 16 different available ticket prices will jump up to 32 different price levels for next season, and price increases will be nearly universal around the SAP Center. The biggest price hikes will be for Premium Glass seats, which sold for between “$137 and $222 per game last season.” Those same seats will go for between $300 and $400 next year” under the new pricing model. The SAP Center can accommodate up to 17,562 spectators, making it one of the smallest arenas in the NHL. As usual, SAP Center leads the way in technological and market innovation. Using the parent company’s vision and business acumen, the building now has added ammunition with which to appeal to consumers and maneuver in a highly competitive market.

 

14. MLB’s push to create more African American pitcher and catcher prospects may pay off this year with high school pitcher Hunter Greene “projected to be the first player chosen” in the MLB draft. Greene, a 6-4, 205-pound right hand pitcher, currently attends Notre Dame High School in Los Angeles. MLB’s African-American population is "hovering around 8%." If drafted at the top of the class this June, Greene would become the first right-handed high-school pitcher to be selected No. 1 overall. There were “only 14 African-American pitchers on opening day rosters last year – 1.6% of all major-league pitchers.” "If you see a guy like Hunter become a really high pick as a pitcher, I’d be thrilled,” said MLB VP/Youth & Facility Development and Director of MLB’s Urban Youth Academy Darrell Miller. “Talking about it is one thing, but seeing guys come through the academies, and the impact he could have on the mound, it gives these kids a vehicle, knowing there’s a chance.” The success of diversity programs must be evaluated with patience, deliberation, and long-term vision. This is one of those cases. Look for increased and consistent talent payoff in the times ahead.

 

15. Budding high school football players now have an alternative to attending college for three years before turning pro: Pacific Pro Football. According to the Washington Post, this upstart league offers players “a salary and instruction they feel is lacking in the college game.” NFL agent Don Yee, who serves as Pac Pro CEO, said that the goal is to “give young prospects a professional outlet to prepare for the NFL.” The league launches in the “midst of a growing debate about amateurism and a college model that rewards student-athletes with scholarships but not salaries.” While the NFL has shown interest in starting a developmental league, Pacific Pro is not affiliated with the NFL at all. Games will take place in smaller stadiums, “perhaps at a community college or a Division III college campus.” If the first season goes according to plan, the league hopes to expand into Northern California and potentially, the Midwest. Interesting concept that identifies an underutilized niche in the market. The league has been in the planning stages for a while, reflecting the deliberate business approach of its founders. After the WFL, USFL, and World League of American Football, the sporting public may be looking forward to another fresh alternative. It has certainly been a long time since the last one.


Follow Rick Horrow (@RickHorrow) and Karla Swatek (@kswak) on Twitter.




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